Add Tricon Residential (TSX: TCN) to the major new cash pouring into the red-hot market for single-family rentals (SFRs).
The Toronto, Ontario-based real estate investment trust (REIT) this week said it had entered into a joint venture with three institutional investors to commit about $5 billion to buy SFRs across the United States.
Its partners in this joint venture vehicle, the company said in its July 19 announcement, are the Teacher Retirement System of Texas, Pacific Life Insurance, and one of Tricon's existing global investors.
The company said it plans to buy more than 18,000 SFRs over the next three years, adding to a portfolio of more than 31,000 single-family and multifamily rental properties across the United States and Canada, with about 90% of its assets under management in the U.S. Sun Belt.
Tricon will serve as the asset and property manager in this joint venture, which follows a now-fully invested joint venture that resulted in the addition of 9,000 homes, the company said.
Booming competition in a growing market
Tricon says it already acquired more than 1,500 homes in the second quarter and anticipates growing its portfolio by more than 6,000 in the coming year.
It'll have some competition. For starters, there's Invitation Homes and its 80,000 or so homes in 16 markets and American Homes 4 Rent and the nearly 54,000 homes for rent it has across 22 states. Read more about both of them here.
Meanwhile, crowdsourced Fundrise recently closed on a financing deal with Goldman Sachs to leverage nearly a half-billion dollars into newly built SFRs. Proptech Mynd, and its financial backer Invesco, plan a buying spree that could hit the $5 billion mark, and Blackstone Group is buying Home Partners of America and its 17,000 or so SFRs for about $6 billion through its Blackstone REIT affiliate.
Incidentally, Blackstone REIT announced last summer a $300 million preferred equity investment in Tricon.
Those are just some of the examples of serious investment in a market for rentals that's still well behind that of home purchases. Tricon points out in its announcement that the National Rental Home Council says owner-occupied housing in the United States has increased by more than 10% in the past five years, while the amount of rental housing has only increased by 1%.
"In 2020 alone, the rental housing market lost over 275,000 units. Tricon is addressing this gap by providing affordable rental housing," the company says.
A bit more on Tricon as an investment on its own
Tricon's president and CEO, Gary Berman, also said in the announcement that his company now "is well-positioned to accommodate the incredible demand we are seeing across the U.S. Sun Belt for high-quality single-family rental homes at an accessible rental price point. We will also be able to enhance the scale and efficiency of our technology-enabled operating platform, allowing us to continue to innovate and deliver superior service to our residents."
As a side note, according to Motley Fool Canada's Chris MacDonald, Tricon is planning to sell a majority interest in its American multifamily portfolio. He wrote: